Question

1. Fully explain the statement/quote (from Porter’s article, What is Strategy) below and why it is true. In your answers, please explain what is meant by operational effectiveness. I want you to explain the quote as if you were informing those top managers around you in order for them to realize how your company is going to achieve true competitive excellence and not settle for mediocrity. Explain the quote in a real practical, business way. “Constant improvement in operational effectiveness is necessary to achieve superior profitability. However, it is not usually sufficient. Few companies have competed successfully on the basis of operational effectiveness over an extended period, and staying ahead of rivals gets harder every day.”

Answer 1

Operational effectiveness means how well you are operating. It speaks abouts costs , time , service levels, customer satisfaction etc. More effective the operations of a company are , the more profitable it is. For example, if we reduce our costs, profit increases. Costs can be reduced by reducing wastages in production , transportation and storage , by accurate forecasts, by following ordering policy which incurs less cost ,etc. Increased service levels increase number of orders from existing customers and also bring in new customers. Being operationally efficient also gives an advantage over rivals, especially the ones new in the industry. For a company to be operationally efficient, it takes time and huge efforts by right set of people. As it is difficult and time taking to be operationally efficient rivals take time to replicate the model. There are new ways and technologies developing every day. Therefore, there is always a scope for improvement. One needs to continuously improve their operations to be ahead of their competition.